Saturday, April 29, 2006

P2P loan marketplace sites Prosper and Zopa may not even realize the tremendous extensibility of the platforms they are creating. Prosper has created a group lending structure as microcredit and affinity models have shown that repayment ratios should be higher for group members than standalone individuals due to the community shame factor, incentives and (in the Grameen Bank model) cross co-signing of the loans.

Two months after the site's public launch, Prosper members have started over 1200 affinity groups, in a full breadth of areas ranging from entrepreneurs to libertarians to military and religious groups to LGBTs to college alumni to gardeners, essentially in any personal, professional, educational, religious, hobby, etc. affiliation that a person may have.

These Virtual Affinity Groups will start to amass tremendous economic power, bringing hundreds of individuals together both on an ongoing basis and as virtual "flash mobs" for the purpose of participating in specific transactions or other activities.

Virtual Affinity Groups may get their start in the lending context but can quickly expand to include all community financial transactions: GroupCredit, GroupInvesting (real estate, etc.), GroupPurchasing, GroupJobs/GroupProjects and GroupPhilanthropy/GroupSocial Entrepreneuring. Financial transactions no longer need to be unitary, all major financial transactions can take place in groups, with radically different business models, on an unprecedented scale and with tremendous savings and efficiency, for example, GroupPurchasing can include vendors bidding to groups of thousands of buyers assembled to purchase certain items and services.

Beyond the economic sphere, Virtual Affinity Groups can also wield substantial political and social power, for example with purpose-based assembly and disassembly of affinity PACs, and regular voting on general issues, say each registered voter has a high-level ballot of daily or weekly state and federal legislature issues on which to have general input.

The ability to collect thousands of individuals around a temporary or ongoing purpose on the Internet is possibly the most important and interesting functionality of what is being created by P2P lending marketplace platforms.